In yesterday’s post, we provided an overview of captive insurance entities. Today, we will consider the specific facts of two different so-called captives, and whether or not they qualified as such according to the Tax Court and the IRS, respectively.
The Captive Arrangement in the Tax Court
In Rent-a-Center v. Commissioner, the Court
Here We Go Again
It is a common theme of these posts that a transaction has to make sense from a business perspective, that it should not be undertaken primarily for tax purposes, and that the goal of tax planning should be to maximize the economic benefit of the transaction by reducing the resulting tax
Our last post examined what are commonly thought of as the most “direct” income tax consequences arising from a the buy-out of a departing shareholder by way of a cross-purchase or redemption of his or her shares. However, there are a number of other tax consequences to be considered that are no less direct, and
Once Upon A Time . . .
a corporation, Corp, was founded. The year was 2006, and Employee immediately was hired as Corp’s chief technology officer and received restricted stock grants from Corp. As a “founder” of Corp, Employee initially owned 9.8% of Corp’s stock. However, each time investors infused capital into Corp, Employee’s interest
A Common Fact Pattern
Partner One and Partner Two started LLC in 2002. LLC was treated as a partnership for tax purposes. They contributed a good deal of their savings and labor, but LLC lost money for the first several years of operation. Another partner, deep-pocketed Corporation, was willing to contribute almost one million dollars
A taxpayer has the legal right to minimize his or her taxes, or to avoid them completely, by any means that the law allows. However, this right does not give the taxpayer the right to structure his or her affairs by using “business entities” that have no economic reality and that are employed only to
For the owner of a closely-held business, and especially one with a limited support staff, it can be easy to drift into carelessness or, worse, neglect, when it comes to maintaining detailed records of the business’s expenses. However, as one taxpayer recently learned the hard way, such inattention to detail can come back to haunt
Every now and then, a case comes along that is just chock-full of lessons, not only for taxpayers, but for their advisors as well. The Tax Court’s decision in Cavallaro v. Comr
. describes such a case. It involves closely held corporations, related party transactions, a tax-free reorganization and, oh yeah, a huge taxable gift.
Equity compensation is attractive to employees and employers alike. Because the opportunity to participate in the growth of a company provides potentially unlimited compensation to employees, its incentive value is quite powerful to employers. In this last post in this series on Section 409A, we will sort through the types of equity compensation that are
Our last post described the portions of an executive employment agreement that may be impacted by Section 409A. However, Section 409A may also impact the structure of other, less traditional compensation paid to key employees. In the context of a closely-held business, two commonly-encountered alternative compensation arrangements used outside of the context of an individual